Value Corp. recently reported earnings of $2 per share and each of its 50,000 shares is currently selling for $20. The firm's book equity is $600,000. Given this information, answer the following about the firm's market-value ratios:
a. Calculate the firm's price-to-earnings (P/E) and market-to-book ratios.
b. If the P/E ratio is said to compare favorably to that of the industry average, speculate on what could account for this fact.

Question

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The Answer of Value Corp. recently reported earnings of $2 per share and each of its 50,000 shares is currently selling for $20. The firm's book equity is $600,000. Given this information, answer the following about the firm's market-value ratios:
a. Calculate the firm's price-to-earnings (P/E) and market-to-book ratios.
b. If the P/E ratio is said to compare favorably to that of the industry average, speculate on what could account for this fact.